Investing tool
Merger arbitrage calculator.
When a company agrees to be bought, its shares usually trade a little below the offer price. Enter the deal's numbers and see whether that gap pays for the risk and the wait.
The deal's numbers, per share, and your estimate that it closes.
You pay 48.50 for something you'll be paid 50.00 for in 6 months. If it works, you make +1.50 a share (3.1%).
If it breaks, it falls to about 38.00 and you lose -10.50: you risk 7 for every 1 you can make.
With bills at 4%, you need at least a 95.6% chance of closing for it to pay.
At your 95%, on average you make 0.07 a share less than in bills.
For it to beat bills at your estimate, don't pay more than 48.43 a share, before costs.
Your estimate is within 3 points of the bar. A small error in it flips the answer: ask whether you can really be that precise.
Where your estimate lands
from 50% to 100%| Months to payment | |||||
|---|---|---|---|---|---|
| 6 months | 9 months | 12 months | 18 months | ||
| Probability | 97% | +0.17+0.4%+0.7% a year | -0.31-0.6%-0.9% a year | -0.80-1.6%-1.6% a year | -1.77-3.6%-2.4% a year |
| 95% | -0.07-0.1%-0.3% a year | -0.55-1.1%-1.5% a year | -1.04-2.1%-2.1% a year | -2.01-4.1%-2.8% a year | |
| 93% | -0.31-0.6%-1.3% a year | -0.80-1.6%-2.2% a year | -1.28-2.6%-2.6% a year | -2.25-4.6%-3.1% a year | |
| 90% | -0.67-1.4%-2.8% a year | -1.16-2.4%-3.2% a year | -1.64-3.4%-3.4% a year | -2.61-5.4%-3.6% a year | |
| 85% | -1.27-2.6%-5.2% a year | -1.75-3.6%-4.8% a year | -2.24-4.6%-4.6% a year | -3.21-6.6%-4.4% a year | |
Each cell shows what you make or lose per share against leaving the money at 4% a year; below, the same as a share of the price, and that share turned into a yearly rate. All before commissions and taxes.
“Give a man a fish and you feed him for a day. Teach him how to arbitrage and you feed him forever.”
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